They propose an increase in the ONP’s minimum pension: what does it consist of and what is the amount?

The ungrouped congressman Jaime Quito Sarmiento proposed legislative initiative No. 7103 with the objective of progressively increasing the minimum pension in the ONP until it equals the amount of a minimum vital remuneration, currently established at S/1,025.

This initiative originates to comply with the ruling of the Constitutional Court of 2019 (ruling 0009-2015-PI/TC), which ordered Congress and the Executive to gradually increase, over a period of 3 years, the minimum pension with the purpose of ensure that pensioners can meet their basic needs.

What would be the new amount of the ONP minimum pension?

The current minimum pension is S/500 and the increase suggested by the congressman reaches a ceiling of S/1,205. This increase must be carried out gradually over a period of no more than three years.

“Congress and the Executive have disregarded the TC ruling on the increase in pensions for 5 years, which is why, with project 7103, we propose a compliance route; We have calculated that, with an approximate contribution rate of 5% of the remuneration by employers, the equalization of the minimum pension with the minimum remuneration can be financed. And this should be the general rule,” said Jaime Quito.

He also pointed out that the increase to S/1,205 could be significantly lower if the Executive fulfills its commitment to gradually increase the minimum pension by 2024, until it equals the minimum vital remuneration.

A gradual change in the ONP minimum pension

The initiative states that the implementation of these modifications will be carried out progressively. This implies that private companies will increase their contributions gradually to prevent imbalances in public finances, particularly in relation to public sector employees. Likewise, a differentiated treatment is contemplated for microenterprises, which would be required to pay only 50% of the standard rate.

In addition, the regulations propose the establishment of an extra contribution by the employer, called Complementary Pension Contribution. The purpose of this is to strengthen the economic strength of the ONP and ensure that the minimum pension is maintained in a state of balance.

Regarding the feasibility of implementing this contribution, Congressman Jaime Quito highlighted that, in accordance with Convention 102 of the International Labor Organization (ILO), the financing of pensions should not fall exclusively on the contributions of workers (which currently are established at 13% of their salaries in the ONP).

Likewise, he stressed that Decree Law 19990 originally contemplated employer contributions, but these were eliminated during the privatization reform in the 90s.

What is the ONP?

The ONP, which means Pension Normalization Office, is a government entity in Peru in charge of administering the public pension system. Its main function is to guarantee the granting and payment of pension benefits to members, such as retirements, disability and survival pensions, among others. This system is based on the principle of intergenerational solidarity, in which the contributions of active workers finance the pensions of retirees.